BUS 342 Company Analysis Research Project Guidelines

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School

California Polytechnic State University, San Luis Obispo *

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Course

MKT3250

Subject

Finance

Date

Jan 9, 2024

Type

pdf

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Uploaded by DeanPuppy6022

COMPANY ANALYSIS RESEARCH PROJECT: For you to develop a deeper understanding of the meaning of a company’s financial results and how they impact performance and growth , you are being asked to participate in the financial analysis of a company. Experienced managers, investors, and analysts go through this process before making important decisions that relate to investing strategies. The project is divided into two parts. Both parts will be due by 11:59pm on Friday, June 9, 2023, with a minimum of five cited sources (APA format). Part 1 (100 Points): A paper that is typed, single-spaced, and does not exceed ten pages (excluding cover page, appendices, financial statements, spreadsheets, and works cited). Your cover page should include the company name/logo and the list of student names in alphabetical order (by last name) who have worked on the project. Any screenshots or graphs included should be labeled (e.g., Exhibit One) and analyzed rather than simply pasted in. This includes excel spreadsheets used for financial ratio calculations. TO DO LIST: 1) Sign up for a company on the Company Analysis Research Project spreadsheet provided on Canvas. 2) Use the Stock Tracker spreadsheet provided on Canvas to chart the stock price of selected company since January 1, 2021; 3) Company Overview and Competitive/Industry Analysis:  Stock Ticker Symbol and exchange where stock is traded (NYSE or Nasdaq)  CEO  Key officers  Board of Directors  Org Charts (photo or screenshot of this does not count towards the ten-page maximum length)  Markets Served (what industry does your firm operate in? what are its business/customer segments?)  Top three competitors  52 week (about 12 months) high/low price of stock (found in Mergent Online or Yahoo Finance) These items should include more detailed research and required sources:  Economic environment where firm operates  Trends/Opportunities that may affect firm’s stock price (Use Mergent Intellect, Mergent Online, Statista, etc.)  Describe key issues (of company and its industry)  Brief overview of three competitors and their impact on your company

4) Calculations of Financial Ratios of the company and one major competitor for the past two full years: Download the most recent financial reports for your company and one major competitor. These numbers can be found in a recent annual report, in the company’s 10K filing, (see Mergent Online) or on the U.S. Securities and Exchange Commission EDGAR database .  Download the balance sheet, income statement, statement of cash flows, and statement of retained earnings to an excel spreadsheet or google sheet. Calculate the following ratios: You must use Microsoft Excel functions for your calculations. and explain how your firm compares to one major competitor .  Short-term solvency or Liquidity Ratios: Cash Ratio, Current Ratio, Quick Ratio  Long-Term Solvency, or Financial Leverage Ratios: Total Debt, Debt-Equity, Equity Multiplier, Times-Interest-Earned, Cash Coverage  Asset Utilization Ratios: Inventory Turnover, Days’ Sales in Inventory, Receivables Turnover, Payables Turnover, Days’ Sales in Receivables, Days’ Cost in Payables, Total Asset Turnover, Capital Intensity  Profitability Ratios: Profit Margin, Return on Assets (ROA), Return on Equity (ROE)  Market Value Ratios: Price-Earnings, Price-Sales, Market-to-Book, EBITDA 5) Financial Analysis of the Company:  Explain the strengths and weaknesses of your company compared to its major competitor as determined by your ratio analysis. What recommendations would you give to improve its financial performance? Please pay attention to the following: Did revenues have a sizable increase, or a significant decrease, from one year to the next? Did total or fixed assets increase or decrease? Did the company sell off some of its operations during the years you are analyzing? Make sure to review the financial statement notes. These notes may have information that could be important in your analysis of the company. Were there substantial changes in the company’s assets, liabilities, or equity? Did you notice any trends on the income statement? Has the company issued new shares, or bought some back? Has the retained earnings account been growing or shrinking?  Comment on qualitative factors that could impact the firm’s future financial performance: 1) Are the company’s revenues tied to one key customer; 2) To what extent are the company’s revenues tied to one key product? 3) To what extent does the company rely on a single supplier; 4) What percent age of the company’s business is generated overseas? 5) How much competition does the firm face? 6) Is it necessary for the company to continually invest in research and development? 7) Are changes in laws and regulations likely to have important implications for the firm?

6) Stock performance analysis:  Before looking at your firm and its competitors’ betas, whose beta do you expect to be the smallest or largest? Why?  Describe your firm’s beta coefficient in comparison to those of its three top competitors. What surprised you when looking at their betas?  Report 52 week % return and the three competitors in comparison to the S&P 500. Has your stock outperformed or underperformed the overall market during the last 52 weeks? How about your competitors?  What can explain the performance of each company’s stock price?  Research on the company's industry and what types of risk your company has. Are these risks unique to your company or shared with other companies in its industry? Remember that this relates to beta.  Describe significant capital projects that your firm has invested in over the past three years. Examples might include 1) replacement: needed to continue current operations; 2) replacement: cost reduction; 3) expansion of existing products or markets; 4) expansion into new products or markets; 5) safety and/or environmental projects; 6) mergers; 7) other projects (catch-all) like office buildings, parking lots, executive aircraft, etc. Please investigate what type of capital budgeting analysis goes into deciding which projects are chosen for investment. (Average Accounting Return, IRR, MIRR, NPV, Payback, or Profitability Index). If no methods are disclosed, comment on what you think is the best method and why.  How does your firm finance its operations? (Review mixture of debt, preferred stock, and common equity on its most recent balance sheet) 7) Conclusion:  Prepare a graph that illustrates how your stock has performed since January 1, 2021, using the data provided in the Stock Tracker spreadsheet found in Canvas. (Highlight the cells in the Stock Tracker that have your company stock prices and create a graph showing the stock price performance).  Explain what you think have been the main determinants that have had the most impact on your stock's performance. Please conclude your write-up with an estimate of how you think your company's stock will perform over the next year. Refer to the strengths, weaknesses, trends, opportunities, and qualitative factors you mentioned and have researched in sections (3), (4), and (5). 8) Rough Draft Submission:  A rough draft of the paper should be submitted Friday, May 26, 2023 by 11:59pm that contains accurate information using required guidelines of the project.

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Part 2 (50 Points): Prepare a video recording (8-10 minutes) of your group taking on the role of a financial analyst team presenting findings about the company you analyzed and stating whether you recommend that shares in the firm be purchased for a mutual fund you are managing. The video should evaluate the key findings from your paper in an engaging manner . Every member of your group must present a part of the presentation. Do not simply restate the paper in video format, but instead, creatively synthesize your paper into a memorable presentation that provides key insights regarding your company.

TO DO LIST (NOT EXCLUSIVE, MAKE SURE TO BE CREATIVE): 1. Give a brief overview of the company o Who is the CEO of the company? What is his vision for the future? o What industry does your firm operate in? What is its business/customer segments? o Top three competitors and their attributes: is there a competitor that steals the most market share from your company 2. Provide the key aspects of your company’s financial ratios o Discuss the ratios that are the most concerning and the most promising o Discuss the overall solvency and liquidity of the company o Overall do the ratios paint a good or bad picture for the company’s future 3. Provide the key aspects of your main competitor’s financial ratios o Discuss the overall solvency and liquidity of the company o In what areas does the competitor outperform your company o In what areas does your company outperform your competitor 4. Provide a financial analysis utilizing the financial ratios and financial statements o Did revenues have a sizable increase, or a big decrease, from one year to the next? Did total or fixed assets increase or decrease? Did the company sell off some of its operations during the years you are analyzing? o Make sure to report on any noteworthy financial statement notes. o Did you notice any trends on the income statement? 5. Provide an analysis of your company’s stock performance o Discuss the 52 weeks % of your company. Has your stock outperformed or underperformed the overall market during the last 52 weeks? o What can explain the performance of the company’s stock price? o Are these risks unique to your company or shared with other companies in its industry? o What is your company’s beta coefficient? Is the company riskier than its competitors? o Has your company invested in any significant capital budgeting projects that show strong prospects for growth? o How does your firm finance its operations? 6. Conclusion: o Based on your research in the paper and the information provided within your presentation, would you recommend that the firm adds the company to their portfolio? o Provide any additional information that you find pertinent to the discussion of investing in the company

Recommended Project Progress by end of each week (DOES NOT INCLUDE ALL NECESSARY REQUIREMENTS) Week 1: Company Analysis Research Project Company Sign-up Week 2: Download Company Financials and take note of any trends on all financial statements Week 3: Company Overview and Competitive/Industry Analysis Week 4: Work on required ratios for the project Week 5: Finish required ratios for the project Week 6: Financial Analysis of the Company Week 7: Stock performance Analysis Week 8: Conclusion + additional information to sections using your accumulated knowledge of topics. Week 9: Submit rough draft of paper by Friday, May 26, 2023, at 11:59pm Week 10: Submit final paper and video presentation by Friday, June 9, 2023, at 11:59pm.

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